Biofuels: What You Need to Know About This New Market

Ministério das
Minas e Energia
2ND
EDITION UPDATED AND ENLARGED
W H A T Y O U N E E D T O K N O W
A B O U T T H I S N E W M A R K E T
B I O F U E L S

B I O F U E L S
2ND
EDITION UPDATED AND ENLARGED
WHAT YOU NEED TO KNOW
ABOUT THIS NEW MARKET

The history of biofuels in Brazil began with pioneering
tests carried out between 1905 and 1925 with ethanol.
In 1931, the Brazilian Government passed a decree which
obliged the mixing of 5% of alcohol in gasoline imported
into the country; seven years later, Decree-Law No. 737
extended the obligation of mixing 5% of alcohol also to
gasoline produced within Brazil. In the 60s, the discovery
of vast oil reserves in the Middle East lessened the world’s
interest in biofuels. However, with the first world oil crisis
in 1973, the search for new energy sources restarted.
In1975, Brazil launched the National Alcohol Program
(known as Proálcool) – the largest program for the com-
mercial use of biomass for energy purposes in the world.
Two years later, Professor Expedito Parente, of the Ceará
Federal University, discovered biodiesel made from cotton
oil and, in 1980, he registered the first worldwide bio-
diesel patent, now in the public domain.
Throughout the world, with the passing of the years
and the intermittent energy crisis, associated to a greater
demand for fossil fuels, new and strong stimuli emerged
for the development of production technologies both for
ethanol and biodiesel. These two products are starting to
have a leading role in the world’s energy matrix and in the
international fuel market.
Thanks to its climate, geography, vast areas available
for cultivating grain and sugar cane and, also, the high
technology developed by Petrobras, in the past few years
Brazil has become, in world terms, one of the largest
producers of biofuels, with a singular and enviable potential
Presentation

for growth. Currently, nine out of ten cars sold in Brazil
have flex fuel engines, that is, they are powered by gasoline
and alcohol. Bus fleets, trains and trucks powered by
biodiesel are already in use – and the trend, certainly, is
for this market to grow considerably in the next few years.
Exactly for this reason and to explain the importance
of biofuels, their markets and numerous advantages, that
Petrobras took the initiative to produce this specific infor-
mation material solely to explain the importance of bio-
fuels, its markets and numerous advantages. The booklet
“Biofuels: What you need to know about this new market”
seeks to describe the principal points of this new market,
but without the intention of being exhaustive.
It is a dynamic publication – just like the biofuel mar-
ket itself –, and which requires periodic updates, whether
in the printed form, like this second edition, or the elec-
tronic version, accessible via the Petrobras Internet portal
(www.petrobras.com.br). With this booklet, Petrobras
intends to increase the number of communication
channels and make them even more useful to its various
publics, from teachers to authorities, from media profes-
sionals to the sector's technicians.
P r e s e n t a t i o n

S u m m a r y
ABOUT BIOFUELS . chapter one
1. What are biofuels?...................................................................................................................................................... 9
2. What is renewable energy?.................................................................................................................................... 9
3. Are biofuels and biomass the same thing? .............................................................................................. 10
4. What types of biofuels for transport purposes are produced in Brazil? .............................. 11
5. What is the current role of biofuels in the world’s energy matrix? ........................................ 11
6. What is the current participation of renewable energy sources in the Brazilian
and world energy matrix? .................................................................................................................................. 12
7. What is the world's consumption of fuel in liters? .......................................................................... 13
8. Of this volume, what is the percentage of biofuels used? .......................................................... 13
9. Within the world's consumption of biofuels what is ethanol's share?................................ 13
10. Do biofuels represent almost half of the Brazilian energy matrix?.......................................... 14
11. What is the role of Petrobras in the production and distribution of biofuels? ............15
12. What is the importance of CENPES in the biofuel production process?.............................. 16
13. What are the benefits and advantages of biofuels (for the consumer, for the
environment, for Brazil’s economy and for vehicles)? ...................................................................... 17
14. Does the use of biofuels also offer any specific advantage for cars? .................................. 19
15. How many vehicles are powered by biofuels in Brazil?.................................................................. 20

S u m m a r y
ABOUT BIODIESEL . chapter two
16. What is biodiesel? ...................................................................................................................... 22
17. Does biodiesel have the same characteristics as diesel made from oil? ........................ 22
18. What are the ingredients used in the production of biodiesel? ...................................... 22
19. What are the raw materials used in the production of biodiesel? .................................. 23
20. What are the mixtures of biodiesel with diesel oil called?................................................ 24
21. Is there a difference in performance of biodiesel powered vehicles? ............................ 24
22. What will be the cost of biodiesel to the consumer? ........................................................ 25
23. Can any vehicle use biodiesel? ................................................................................................ 25
24. Will the growing use of biodiesel affect the diesel consumed and produced in Brazil? 25
25. What is the estimated demand for biodiesel in Brazil in the short, medium and
long terms? .................................................................................................................................. 26
26. How is biodiesel distributed in Brazil?.................................................................................... 27
27. What is the projection for biodiesel production in the next years?................................ 27
28. What are the biodiesel auctions, how are they carried out and why? .......................... 28
ABOUT H-BIO . chapter three
29. What is H-Bio? ............................................................................................................................ 30
30. What is the difference between H-Bio and biodiesel? Are they competing? .............. 30
31. Is H-Bio already being used in the production of diesel oil at Petrobras refineries?.......... 31

S u m m a r y
32. Is H-Bio already available on the international market? .................................................. 31
33. What is Petrobras' H-Bio production capacity? .................................................................. 32
34. What is Petrobras’ projection for H-Bio production in the coming years? .................. 32
ABOUT ETHANOL . chapter four
35. What is ethanol? ........................................................................................................................ 34
36. Are ethanol and methanol the same thing? ........................................................................ 34
37. Is the production of ethanol increasing in Brazil?.............................................................. 35
38. How is ethanol produced in Brazil and the world? ............................................................ 35
39. Which countries in the world produce the most ethanol? .............................................. 36
40. Which of the two types of cultivation has the greater productivity:
ethanol from corn or from sugar cane?................................................................................ 36
41. Is the price of Brazilian ethanol competitive on the international market? ................ 37
42. How is ethanol distributed in Brazil?...................................................................................... 38
43. How many liters of ethanol are consumed in Brazil and how many liters
are exported? .............................................................................................................................. 38
44. What are the official projections for ethanol production in the coming years? ........ 39
45. How much will be invested in ethanol production in the medium and
long terms? .................................................................................................................................. 40
46. How many alcohol plants are operating in Brazil?.............................................................. 40
47. Is it possible to produce ethanol from other sources? ...................................................... 41
48. Is it possible to fully use the waste from sugar cane production?.................................. 41
49. Will sugar cane cultivation lead to deforestation of the Amazon? .............................. 42
50. Currently, what is the total area of sugar cane cultivation in Brazil? .......................... 42

S u m m a r y
51. Does sugar cane have the greatest area under cultivation in the country,
when compared to soy and corn? .......................................................................................... 43
52. Does growing sugar cane require any special care in relation to land conservation? 43
53. What are the prospects for exporting Brazilian ethanol? ................................................ 44
SOCIAL, ENVIRONMENTAL, ECONOMIC
AND REGULATORY ASPECTS . chapter five
54. Which bodies regulate and inspect the biofuel market in Brazil? .................................. 46
55. What are Petrobras’ goals for the biofuels market in the coming years? .................... 47
56. Are biofuels competitors for fossil fuels? ............................................................................ 48
57. How do biofuels contribute to reducing global warming? .............................................. 48
58. As well as producing energy can biofuels be used for producing
other materials?.......................................................................................................................... 49
59. How do biofuels contribute to generating employment and distributing
income in Brazil? ........................................................................................................................ 50
60. Which generates more employment: the oil or ethanol industry? .............................. 51
61. With the construction of new plants and the increase in alcohol production,
is the trend to generate more employment in the sector? .............................................. 51
62. Has the hard life of the sugar cane worker changed in the last few years? .............. 52
63. Does the biofuel program endanger the supply of food when it uses
agricultural land for producing ethanol and biodiesel? .................................................. 53
64. Is there any risk that Brazilian ethanol production specifically will endanger
food supply on the international market?............................................................................ 54
65. How can the export of biofuels stimulate the Brazilian economy?................................ 55
SOURCES .................................................................................................................................. 56

About
BIOFUELS
[ c h a p t e r o n e ]

1
[ 9 ]
T
hey are fuels produced from biomass (organic matter),
i.e. renewable sources – vegetable matter or animal
compounds. The best known sources in the world are sugar
cane, corn, soy, sunflower seeds, wood and cellulose.
From these sources it is possible to produce biofuels, such
as ethanol and biodiesel. Biofuels are biodegradable –
therefore have less impact on nature
[WHATYOUNEEDTOKNOWABOUTTHISNEWMARKET
]
I
t is energy obtained from renewable sources, i.e.
sources that can renew themselves at a rate to support
their use without restrictions or risk of exhausting
supplies.
What are biofuels?
Soy:
raw material
for biodiesel
2What is renewable energy?

3
[ 10 ]
N
o. Biomass is organic vegetable matter that stores
energy from the sun in the form of chemical energy.
It is also the quantity of living material that exists in a
determined area, at a determined moment, generally
expressed in units of energy or in the dry weight of non-
fossil organic matter. It originates from plants (aquatic or
land), forest residues and from farming
(sugar cane pulp, manure), vegetable
oils (buriti palm, babassu palm, castor
beans, oil palm, etc.), urban waste
(landfills, sewage sludge) and some
industrial waste (from the timber,
food and drink, paper and cellulose
and grain industries).
Biomass for energy purposes includes
the use of these various waste products
for generating alternative energy
sources. Brazil is a large producer of
agricultural products, which in turn
generate an enormous – and continuous – quantity of
biomass.
In Brazil and various countries in the world, this
chemical energy stored in liquid fuels is converted by
industrial processes. For example, it is possible to ferment
sugars from corn, wheat or sugarbeet plantations and
convert them into ethanol. Or make use of vegetable oils,
such as palm heart, soy, castor bean, palm oil, babassu
palm, rapeseed and peanut to substitute for diesel oil as
an energy source.
Are biofuels and biomass
the same thing?
[BIOFUELS
]
Castor bean
cultivation: biomass
for energy purposes

4
[ 11 ]
H
ydrous ethanol, anhydrous ethanol, biodiesel and
diesel produced by the H-Bio process.
What types of
biofuels for transport
purposes are
produced in Brazil?
What is the current
role of biofuels in the
world’s energy matrix?
B
iofuels are energy sources that do
not contribute to the accumula-
tion of greenhouse gases in the atmos-
phere. This is their principal role in the
energy matrix. As the gases generat-
ed when they are used are reabsorbed
during the growth of the next har-
vest, there is a balance between the
emission and absorption of pollu-
tants. Additionally, biofuels that con-
tain oxygen in their composition,
such as ethanol and biodiesel, help
reduce the emissions of carbon
monoxide (CO) when added to fossil fuels. Reducing
these emissions represents less pollution in the local
atmosphere, mainly in big cities.
Part of the
Petrobras biodiesel
laboratory
5
]

[ 12 ]
A
ccording to data from the Energy
Research Company (Empresa de
Pesquisa Energética – linked to the
Ministry of Mines and Energy) of the
Ministry of Science and Technology
and the International Energy Agency
(Key World Energy Statistics - 2006),
the renewable energy sources –
hydraulic, biomass, solar, wind and
geothermal – amount to a participation
of slightly more than 14% of the
world energy matrix.
Among the countries that make up
the OECD – Organization for Economic
Co-Operation and Development (The United States,
Japan, Germany, France, Italy, The United Kingdom,
Canada, as well as Australia, Austria, Belgium, Spain,
Norway, The Netherlands, Portugal, Sweden and
Switzerland), this participation is 6%.
In Brazil, however, renewable energy has a much
bigger presence: 45% of the country’s energy matrix.
There are still no exact statistics on the participation
of biofuels in the Brazilian or world energy matrix.
What is the current
participation of renewable
energy sources in the
Brazilian and world
energy matrix?
Wind power
[BIOFUELS
]
6

7
[ 13 ]
]
What is the world's
consumption of fuel in liters?
9
Within the world's
consumption of biofuels
what is ethanol's share?
I
n 2007, 54 billion liters of ethanol were consumed
throughout the world.
I
n the world, 600 billion liters of fuel are used per year.
B
iofuels (sugar cane ethanol, corn ethanol and
biodiesel) account for 10% of this total volume, or
something around 60 billion liters.
Biofuels represent
10% of the world's
fuel consumption
8
Of this volume, what is the
percentage of biofuels used?

10
[ 14 ]
[BIOFUELS
]
N
o, because as well as biofuels there are other renewable
energy sources being used in Brazil. For instance, the
electricity generated by the hydroelectric power plants,
which have a large share of the country’s energy matrix.
Source: Ministério de Minas e Energia
BRAZILIAN ENERGY MATRIX [ 2006/2007 ]
Wood and other
Biomasses 12,7%
Sugar Cane 14,5%
Others Renewable Sources
2,9%
Oil Derivatives
37,8%
Uranium
1,6%
Coal 6,0%
Natural Gas 9,6%
Hydroelectric
14,8%
WORLD ENERGY MATRIX [ 2005/2006 ]
Hydroelectric 2,2%
Uranium 6,5% Traditional Biomass 9,5%
Oil 35,3%
Natural Gas
21,1%
Coal
23,2%
Renewable 2,2%Renováveis 2,2%
Do biofuels represent
almost half of
the Brazilian
energy matrix?

[ 15 ]
]
11
What is the role of
Petrobras in the
production and distribution
of biofuels?
C
urrently Petrobras produces biodiesel in two pilot
plants in Guararema, in the state of Rio Grande do
Norte. The company's first three industrial scale plants will
be inaugurated in the first half of 2008, with a capacity to
produce 50 million liters annually. Petrobras can also pro-
duce diesel oil partly originating from vegetable oils, by the
H-Bio process, in the company's refineries, and is studying
the possibility of participating in projects to produce fuel
ethanol for export.
For national distribution, Petrobras is represented by its
subsidiary Petrobras Distribuidora (BR). Another subsidiary,
Transpetro, is in charge of pipeline and marine logistics.
Petrobras ethanol
tanks and pipelines:
production also
aimed at exports

[ 16 ]
[BIOFUELS
]
What is the importance
of CENPES in the
biofuel production
process?
12
CENPES:
Biofuels research
and tests line
C
ENPES, The largest energy technology center in Latin
America, has for many years developed various
permanent research lines and tests with biofuels.
Among the research in progress, one of the highlights
is, for example, H-Bio, a new technology to include
vegetable oil in diesel production and an innovative
process for producing biodiesel. Additionally, there is
research in to producing ethanol from cellulose, tests
with vehicles with new fuel formulas containing biofuels
in their composition, and tests to study the effects – and
the possible solutions – of spillages of these fuels on the
ground.

13
[ 17 ]
What are the benefits
and advantages of
biofuels (for the consumer,
for the environment,
for Brazil’s economy
and for vehicles)?
]
U
nlike oil and natural gas, biodiesel and ethanol are
fuels produced from renewable sources. That means
their production can be controlled: more can be planted,
in the event of higher demand, or less at times of
oversupply. Oil – in deposits found underground and
undersea – is becoming ever more scarce and its price
tends to rise; this factor, among others, means that bio-
fuels became more competitive on the global energy
market.
Biodiesel
production chain
generates new
rural jobs

[ 18 ]
According to various scientific
researches, the plants used to make
biofuels absorb carbon gas from the
air, thereby reducing the “greenhouse
effect” and, also, compensating for
the carbon gas that will be emitted
when the fuel is used.
In relation to biodiesel, the pro-
duct will generate large savings on the
importation of oil and, consequently,
for the country’s trade balance.
In logistics and infrastructure
terms, biodiesel can substitute for
traditional diesel oil in the generation
and supply of electricity to remote
communities, which are currently
dependent on mineral diesel oil generators.
For the population, the biodiesel production chain
generates an impressive number of new jobs in the
countryside – planting the raw material – and, therefore
helps promote social inclusion.
The commercial use of biodiesel also drives the
improvement of new technologies, and this accelerates
the learning curve and strengthens national industry and
agriculture.
For the environment, the advantage can be seen in
the reduction of emissions that cause the greenhouse
effect: biodiesel helps preserve the environment and
contributes to improving the air quality in large urban
centers.
[BIOFUELS
]
The biodiesel
production chain
generates new
employment in
the field

W
ithout a doubt. Biodiesel offers greater lubricity and,
therefore, it increases the useful life of passenger
cars, buses and trucks. With a higher flash point and cetane
number, the fuel also increases the useful life of the
exhaust system catalyzer.
Additionally it is important to highlight that
biodiesel is:
A renewable energy source, an environmentally
friendly fuel using various raw materials.
A natural and biodegradable product, which
generates less emissions of carbon monoxide,
particulates and other pollutants.
14
[ 19 ]
]Greater lubrication
capability and longer
life for engines:
advantages for
the consumer
Does the use of
biofuels also offer
any specific
advantage for cars?

15
[ 20 ]
[BIOFUELS
]
Gas station:
number of flex fuel
powered vehicles may
reach 15 million
in 2013
A
ccording to the Brazilian Automotive Vehicle
Manufacturers Association (ANFAVEA - Associação
Nacional dos Fabricantes de Veículos Automotores),
since March 2003, 5 million vehicles have been equipped
with flex fuel engines in Brazil. In 2013, the number of
vehicles powered by biofuels will reach 15 million units.
How many vehicles
are powered by biofuels
in Brazil?

About
BIODIESEL
[ c h a p t e r t w o ]

16
[ 22 ]
B
iodiesel is a biodegradable fuel derived from
renewable sources, which totally or partially
substitutes for mineral diesel oil in diesel internal
combustion engines, such as in trucks, tractors, buses
and other vehicles, or in stationary engines, such as
those used for generating electricity.
What is biodiesel?
Does biodiesel have the same
characteristics as diesel
made from oil?
N
o, biodiesel is an ester (a product of the reaction of
an acid, generally organic, with an alcohol) while
diesel is an n-paraffin (or normal paraffin, a subproduct
of oil processed at the refineries).
17
What are the ingredients
used in the production
of biodiesel?
V
egetable oils or animal fats, ethanol or methanol and
catalysts.
18
[BIOFUELS
]

[ 23 ]
]
What are the raw materials
of biodiesel?
COTTONSEED
PEANUTS
BABASSU PALM OIL
BURITI PALM OIL
RAPESEED
PALM OIL
SESAME SEEDS
SUNFLOWER SEEDS
JOJOBA SEEDS
LINSEED
CASTOR SEEDS
OILSEED
RADISH
COOKING OIL
PALM KERNEL OIL
PEQUI OIL
JATROPHA
SOYBEAN
TUCUMA PALM
INDUSTRIAL
WASTE
TALLOW OR
ANIMAL FATS
Sunflower seeds
Castor seeds
Jatropha
Soybean
Peanuts
19

20
[ 24 ]
[BIOFUELS
]
F
or a 2% mixture the denomination is B2 (2% biodiesel
and 98% diesel oil); a 25% mixture is called B25
(25% biodiesel and 75% diesel oil); A 36% mixture is
known as B36 (36% biodiesel and 64% diesel oil); and
so on, including B100 (100% biodiesel).
B2 2%
B25 25%
B36 36%
B100 100%
What are the mixtures
of biodiesel with diesel
oil called?
Is there a difference in
performance of biodiesel
powered vehicles?
I
n the case of B5 (5% biodiesel and 95% diesel oil), for
example, CENPES research proves that it is practically
impossible to observe engine performance differences
when compared to pure diesel oil.
21
BIODIESEL VARIANTS

[ 25 ]
A
s the production of biodiesel is
still low, currently its cost is high.
To have the same price as diesel oil,
there will need to be government
incentives, large scale production and
improvement of the process.
]
What will be the cost of
biodiesel to the consumer?
R
egulations obligatorily establish a mixture, creating a
“captive market” for biodiesel, replacing part of the
diesel oil consumed in the country. It is important to
remember that diesel consumption is growing, but Brazil
still imports this product. Therefore, biodiesel will help to
lessen Brazil’s foreign exchange expenditure.
Will the growing use of biodiesel
affect the diesel consumed
and produced in Brazil?
24
Can any vehicle use
biodiesel?
N
o, only vehicles with diesel engines.
23
22

[ 26 ]
[BIOFUELS
]
25
F
rom January 2005 up to the end of 2007, the coun-
try consumed more than 850 million liters of
biodiesel. The forecast is that by the end of 2008 there
will be a firm market of 1.3 billion liters of biodiesel.
From 2010, when the mandatory addition of 5% of
biodiesel (B5) to mineral diesel is expected to come in to
force, demand will rise to 2.3 billion liters annually
What is the estimated
demand for biodiesel in Brazil
in the short, medium and
long terms?
PRODUCTION PROSPECTS *
2007 2008 2009 2010
MILLIONLITERS
2300
2000
1800
1500
1300
856
500
*
The projections above may change in case mandatory mixtures with higher biodiesel
percentages are anticipated.

[ 27 ]
]
How is biodiesel
distributed in Brazil?
B
iodiesel reaches all states in Brazil by an extensive
distribution network. Petrobras Distribuidora,
for example, has the product on offer at all of its
approximately 5,500 gas stations in the country.
Petrobras
Distribuidora has
approximately
5,500 gas stations
throughout Brazil
What is the projection
for biodiesel production
in the next years?
I
n the Petrobras Strategic Plan for 2011, the annual
biodiesel production target is 885 thousand cubic
meters.
27
26

[BIOFUELS
]
What are the biodiesel
auctions, how are they
carried out and why?
[ 28 ]
28
T
he public auctions of the National Petroleum, Natural
Gas and Biofuels Agency (ANP - Agência Nacional do
Petróleo, Gás Natural e Biocombustíveis) were created by
the National Council for Energy Policy (CNPE - Conselho
Nacional de Política Energética) as a method to stimulate
biodiesel production in Brazil. The auctions are held by
ANP itself, which accepts the best bids to sell the volumes
of fuel. In the first five auctions held, Petrobras was
compulsorily obliged to purchase 93% of the biodiesel
auctioned, the remaining 7% went to the Alberto
Pasqualini Refinary – known as REFAP.

About
H - B I O
[ c h a p t e r t h r e e ]

29
[ 30 ]
[BIOFUELS
]
Petrobras H-Bio
process plant
I
t is a process for producing diesel oil from vegetable
oils. It consists of the hydrogenation of a gasoil stream
mixed with the vegetable oil by a hydrotreatment unit
(HDT).
What is H-Bio?
What is the difference
between H-Bio and biodiesel?
Are they competing?
H
-Bio is a process for producing diesel oil (n-paraffins),
while biodiesel is a product in itself (ester). As
regulations will make it mandatory to add biodiesel to
diesel oil sold throughout Brazil, and as the final product
of H-Bio is diesel oil itself, there is no competition
between them, but complementarity.
30

31
[ 31 ]
]
Is H-Bio already being
of diesel oil at
Petrobras refineries?
T
he H-Bio process is used in the production of diesel oil
in accordance with the refining opportunity criteria
established by Petrobras. Five refineries are already
adapted to use this process, and the production from the
first tests was all sold on the Brazilian market.
Is H-Bio already available on
the international market?
H-Bio:
Petrobras has
five refineries
already adapted
N
ot yet. But there is interest from other companies in
importing the Petrobras H-Bio technology.
32

33
[ 32 ]
[BIOFUELS
]
What is Petrobras'
H-Bio production
capacity?
T
he H-Bio production forecast for 2008 is 425 thou-
sand cubic meters, when industrial tests will be made
at three more refineries: REDUC, REVAP and RPBC.
Distribution will be made in the same manner as for any
other diesel produced at the Petrobras units.
What is Petrobras’ projection
for H-Bio production in the
coming years?
The forecasts
for 2012 are
encouraging
T
he company forecasts that, up to 2012, it will have the
capacity to process 1.05 million cubic meters of diesel
oil per year using H-Bio technology.
34

About
E T H A N O L
[ chapter four ]

35
[ 34 ]
E
thanol is an alcohol, an organic oxygenated
compound, also known as ethyl alcohol, and its
chemical formula is C2H5OH.
In Brazil ethanol is used as an
automotive fuel in two forms:
hydrous alcohol, for alcohol or flex
fuel powered cars, and anhydrous
alcohol, which is currently added to
gasoline in the proportion of 25%.
The difference between the two is
the water content present in the
product: Hydrous alcohol has around
7% water, while anhydrous alcohol
has only a maximum of 0.7%.
What is ethanol?
N
o. Methanol is also an alcohol, an organic oxygenated
compound, but it is known as methyl alcohol and has
a different chemical formula: CH3OH. However, both can
be obtained from fossil sources (natural gas) or renewable
sources (biomass).
Methanol has greater calorific power than ethanol,
but it is more reactive and, therefore, more toxic to
humans – which requires more care in its handling.
Another relevant difference is that the use of methanol
as a fuel is being discontinued throughout the world,
whereas the use of ethanol is clearly growing.
Are ethanol and methanol
the same thing?
[BIOFUELS
]
Alcohol: pure and
added to gasoline
36

37
[ 35 ]
Is the production of ethanol
increasing in Brazil?
Y
es. In 2007, the increase was 11.5%. The Sugar Cane
Agroindustry Union (UNICA – União da Indústria de
Cana-de-Açúcar) estimates that ethanol production in
Brazil will reach 22 billion liters with the 2008/2009
harvest, an increase of 23% in relation to the previous
harvest.
How is ethanol produced
in Brazil and the world?
]
38
I
n Brazil ethanol is produced by fermenting, with
fermentation agents, the liquid extracted from
sugar cane. In other parts of the world, corn, cassava and
beetroot, for example, are also used as raw materials.
However, in these examples the starch present in the
raw material has to be transformed in to sugar before
fermentation. This additional stage increases costs and
reduces the quantity produced, when compared to the
direct fermentation of sugar cane. After fermentation,
the product passes through various stages, culminating
in its distillation to remove excess water and make it
suitable for fuel use.
Latin America, part of Africa, India and Southeast
Asia produce ethanol from sugar cane. Production in the
United States and China is, mainly, with the use of corn.
In Europe, the most common raw material is beetroot,
but grapes are also used.

39
[ 36 ]
[BIOFUELS
]
B
razil and the United States produce 85% of the
world's ethanol. Brazil produced 21.5 billion liters
and the United States 24.5 billion liters from the last
harvest. The third largest producer is China, with a 2.7%
share in this market. In fourth place is the European
Union with 2.5%.
Which countries in the world
produce the most ethanol?
Which of the two types of
cultivation has the greater
productivity: ethanol from
corn or from sugar cane?
T
he cultivation of sugar cane produces almost double
the amount of ethanol than from corn. In Brazil, 7,500
liters of ethanol are produced per hectare planted with
sugar cane. In the United States, the production of ethanol
from corn is not greater than 3,800 liters per hectare.
Brazil and the
USA are the leaders
in ethanol production
40

41
[ 37 ]
I
t is probably one of the most competitive. It is up to
50% lower than corn ethanol, and this explains why
Brazil currently has around 40% of the world production
of the product.
]
Sugar cane
harvesting is
mechanized
Is the price of Brazilian
ethanol competitive on the
international market?

42
[ 38 ]
[BIOFUELS
]
How is ethanol
distributed in Brazil?
O
f the 22.5 billion liters of alcohol – hydrous and
anhydrous – produced from the last harvest (2007/
2008), the greater part (73.6%, or 16.6 billion liters) was
consumed internally and was effectively used as vehicle
fuel; only 15% of production was exported.
43
How many liters of ethanol
are consumed in Brazil and
how many liters are exported?
Petrobras’
ethanol tanks
E
thanol produced by the plants is acquired by the fuel
distributors and taken to their distribution bases,
from where it is sold to gas stations in a pure state
(hydrous alcohol) or mixed with gasoline (anhydrous
alcohol). Transport is normally by road, although in some
cases railways or pipelines are used.

44
[ 39 ]
]
What are the official
projections for ethanol
production in the coming years?
A
ccording to the Ministry of Agriculture, Husbandry
and Supply (MAPA - Ministério da Agricultura,
Pecuária e Abastecimento), Brazil will reach a production
level of around 37 million cubic meters in 2015, more
than doubling its current production.
The estimate is that in 2010/2011 production will be 29.7
billion liters, of which 23.2 billion liters will be for the
internal market and 6.5 billion liters for export.
Brazil will
double its ethanol
production by 2015

[ 40 ]
[BIOFUELS
]
Currently there
are around 350
ethanol plants
in Brazil
C
urrently there are around 350 units, some in the
construction phase. The forecast is that by the
2012/2013 harvest there will be more than 410 plants
in operation. Currently, a hundred of these are dedicated
to ethanol production.
46
How much will be invested
in ethanol production in the
medium and long terms?
A
ccording to the Sugar Cane Agroindustry Union
(UNICA - União da Indústria de Cana-de-Açúcar),
investments in new mills and enlarging alcohol plants
in the next five years will total more than R$ 17 billion.
45
How many alcohol plants
are operating in Brazil?

[ 41 ]
Is it possible to produce
ethanol from other sources?
Y
es. It is technically possible to produce ethanol from
cellulose on an industrial scale. The main restraint is
its cost, still high, but developed countries have invested
large sums in new technology to reduce the cost.
47
Is it possible to totally
use the waste from sugar
cane production?
]
48
Ethanol:
Occupies only 3.3%
of the country's
agricultural area
C
ertainly. The vinasse, for example, is used as a soil
fertilizer. The bagasse has two uses: part is used in
boilers – to generate power – the rest is sold to indus-
tries. In Brazil almost the entire orange juice industry
uses sugar cane bagasse as an energy source. The straw
(dry leaves) is also used in boilers. What is left over stays
in the fields as fertilizer.

49
[ 42 ]
[BIOFUELS
]
T
he Amazon Forest regions are not the most recom-
mended for cultivating sugar cane, due to factors
such as the climate, its suitability for farming and cattle
raising and logistics are real limitations. From the social-
economic and environmental point of view, such limita-
tions compromise the success of introducing sugar cane
cultivation and installing the sugar/alcohol industry in
that region.
The Central-South region, where cultivation is
currently expanding, has the best conditions, as it has
underused areas available which are very suitable for
agriculture. This allows the rational and efficient mana-
gement of the land – with the practice of crop rotation,
to improve the physical-chemical characteristics and
phytosanitary control –, agriculture with less applica-
tion of consumables and reduction of costs, therefore it
is possible to generate greater income per area unit.
Will sugar cane cultivation lead
to deforestation of the Amazon?
Currently, what is the total
area of sugar cane cultivation
in Brazil?
50
O
f the 340 million hectares available for planting
(arable land) in the country, 90 million are proven as
adequate for growing sugar cane and, currently, its cul-
tivation occupies only 7 million hectares – half of which
is for sugar production.

51
N
o. Cultivation of soy currently occupies 22 million
hectares in Brazil and corn, 13 million hectares.
Does sugar cane have the
greatest area under
cultivation in the country,
when compared to soy
and corn?
S
ugar cane cultivation is expan-
ding in the Central-South region,
on flat and/or slightly hilly land, in
degraded areas and poorly utilized
pasture. On the other hand, sugar
cane cultivation improves the physi-
cal-chemical characteristics of the
soil and losses by erosion are much
smaller than with most crops.
Does growing sugar
cane require any special
care in relation to land
conservation?
[ 43 ]
]
52

[ 44 ]
[BIOFUELS
]
What are the prospects
for exporting Brazilian
ethanol?
53
G
enerally, the prospects for exporting ethanol are very
positive – although it depends on the speed at which
the international market develops. In 2010, according
to the Ministry of Development, Industry and Trade,
Brazil will export around 7 billion liters of the fuel.
Estimates
show that in 2010
a volume of 7 billion
liters of ethanol will
be exported

Social, environmental,
economic and
regulatory aspects
[ c h a p t e r f i v e ]

54
[ 46 ]
T
he Ministry of Agriculture, Husbandry and Supply
(MAPA - Ministério da Agricultura, Pecuária e
Abastecimento) is responsible for monitoring agricultural
production and for regulating industrial production,
using the plants and distilleries registry. Those registered
with the National Petroleum, Natural Gas and Biofuels
Agency (ANP) can sell the fuel to the distributors –
which in turn are also regulated by the ANP.
Which bodies regulate
and inspect the biofuel
market in Brazil?
[BIOFUELS
]
Alcohol plant:
regulation in charge
of MAPA and ANP

55
[ 47 ]
]
What are Petrobras’
goals for the biofuels
market in the
coming years?
I
n its Strategic Plan, the company has the goal to be
the largest biodiesel producer in Brazil by 2011, and
intends to act selectively in the ethanol value chain and
to increase it exports of this product to 3.5 billion liters
annually.
According to the
Petrobras Strategic
Plan, exports of
ethanol will reach
3.5 billion liters per
year in 2011

[ 48 ]
[BIOFUELS
]
N
o. The future for biofuels is to be used as
additives and to complement fossil fuels. Some
countries, such as Brazil, already add ethanol to its
gasoline, and biodiesel to diesel oil, not only as a way to
minimize air pollution, but also to improve fuel quality.
Are biofuels competitors
for fossil fuels?
How do biofuels
contribute to reducing
global warming?
56
57
A
s biofuels represent renewable
energy sources, the gases gener-
ated in their use are reabsorbed dur-
ing the growing of the next harvest,
there is a balance between the emis-
sion and absorption of greenhouse
gases in the atmosphere. Additio-
nally, biofuels that contain oxygen in
their composition, such as ethanol
and biodiesel, help reduce the emis-
sions of CO2 when added to fossil
fuels.

[ 49 ]
]
58
Plastics can be
produced from
ethanol, although
the cost is still high
T
here already exists a very well developed chemical
alcohol technology for producing substitutes for
petrochemical products – such as for ethane alcohol
and biodegradable plastics, among others. The strongest
existing barrier against its large scale adoption is the
price, generally higher than oil derivatives.
As well as producing
energy can biofuels
be used for
producing other
materials?

[ 50 ]
[BIOFUELS
]
T
he construction of new sugar cane and biodiesel
plants generates direct and indirect jobs and contri-
butes to keeping workers in the rural areas. The workers
can obtain an income from agriculture, which reduces
the exodus from the countryside.
59
How do biofuels
contribute to generating
employment and
distributing income
in Brazil?
Peanut
plantation workers:
The growing biofuel
industry generates
employment
throughout the
country and reduces
the rural exodus

60
Which generates more
employment: the oil or
ethanol industry?
T
he ethanol industry employs 20 times more labor per
liter produced than fossil fuel and alternative ener-
gies industries, such as hydrogen and electricity.
T
he State of São Paulo alone has
400 thousand people employed
in sugar and alcohol production.
The installation of new plants is
happening in regions where employ-
ment opportunities are scarce.
Therefore, new job opportunities
will guarantee employment to the
population of these regions and in
neighboring areas.
61
]
[ 51 ]
With the construction of new
plants and the increase in
alcohol production, is the
trend to generate more
employment in the sector?

[ 52 ]
[BIOFUELS
]
Sugar cane
plantation workers:
Fairer pay and
reduction in
working hours
62
Has the hard life of the sugar
cane worker changed in the
last few years?
W
orking conditions have improved for sugar cane
workers, by, for example, better pay and a reduc-
tion in working hours.
The work that causes most controversy is cutting the
burnt sugar cane. But the agricultural areas that are
expanding allow the mechanization of farming opera-
tions, in accordance with Federal Decree 2.661 of 1998,
which requires a reduction in sugar cane burning, and
with São Paulo State Law No. 11.241/2002, which during
the next few years requires the total elimination of burn-
ing in areas that can be mechanized.

[ 53 ]
T
here is no truth in the argument
that there is a shortage of food in
the world or, in particular in Brazil;
what is missing is income for the
poorer members of the population
to buy the food which, often, is
destroyed by the producer or left
unharvested, due to low market
prices. With the expansion of the
biofuels industry, new jobs will
naturally be created and, consequently,
income generated for the worker to
sustain his family.
In Brazil, areas previously not
used for agriculture, or not adequate for growing food
crops due to low rainfall levels, are those most used for
the expansion of the process of growing the raw materials
for producing biofuels. This is the case in large regions of
the dry Northeast, in which, despite the lack of rain, some
oilseed plants manage to produce their fruit.
Does the biofuel program
endanger the supply of
food when it uses
agricultural land for
producing ethanol
and biodiesel?
Biofuel industry
generates more
income for workers
and their families
63
]

[ 54 ]
[BIOFUELS
]
Ethanol
production doesn't
endanger internal
food supply
64
Is there any risk that
Brazilian ethanol production
specifically will endanger
food supply on the
international market?
B
razil has 850 million hectares and conditions to
economically sustain agricultural production, as
much of this area is poorly used or not used at all –
the same is happening in Africa. Currently, only 7% of
the country's total land is planted with soy, corn, rice,
beans, sugar cane and other crops. Pasture occupies
more than 20% of the total area and forests almost
50%. There is an estimate that around 100 million
hectares of Brazilian land is suitable for expanding agri-
culture – in addition to the expectation of a large
increase in productivity, arising from a higher level of
technology. Therefore, in Brazil there is no risk that the
cultivation of sugar cane will endanger food supply.

[ 55 ]
]
65
A
grobusiness has contributed very positively to
Brazil’s large trade balance. This market earns Brazil
foreign exchange and, particularly in the case of biofuels,
attracts direct, long-term investments to the interior
of the country. This, in turn, promotes continuing rural
employment and economic and social development of
urban areas, as well as generating thousands of jobs in
the base industries that support this activity in Brazil
and, increasingly more, also abroad.
How can the export of
biofuels stimulate the
Brazilian economy?
Cultivation
of oilseed plants,
such as castor beans,
helping to keep
workers in rural areas

Petróleo Brasileiro S.A. – Petrobras
Ministério de Minas e Energia (MME)
Ministério da Agricultura, Pecuária e Abastecimento (Mapa)
Ministério de Ciência e Tecnologia (MCT)
Ministério do Desenvolvimento, Indústria e Comércio (MDIC)
Empresa de Pesquisa Energética (EPE/MME)
Empresa Brasileira de Pesquisa Agropecuária (Embrapa)
União da Indústria de Cana-de-Açúcar (Unica)
Sindicato Nacional das Empresas Distribuidoras de Combustíveis
e de Lubrificantes (Sindicom)
F.O. Licht
IDB-OMC
Icone
The Economist
Toepfer Institute
International Energy Agency [Key World Energy Statistics/2006]
Associação Nacional dos Fabricantes de Veículos
Automotores (Anfavea)
Companhia Nacional de Abastecimento (Conab)
This booklet is produced by Institutional Communications of the
Petrobras Supply Division
EDITORIAL PROJECT, RESEARCH AND EDITION:
Newsday Consultoria de Comunicação e Marketing
GRAPHIC PROJECT:
Mello & Mayer Design
PHOTOS:
Petrobras' images database
Page 51: Keystone Group
Page 52: Ricardo Azoury / Tyba Agency
PRINT:
Setprint Gráfica e Editora
Printed on recycled paper
Final edition date:
31/07/08
Sources
Editorial Board

Biofuels: What You Need to Know About This New Market

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